Frequently Asked Questions

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No, the private placements we facilitate are generally for Qualified Institutional Buyers (QIBs).   

Eligibility Criteria for Qualified Institutional Buyers (QIB):

1. Institutional Investment Managers:
   • Manage at least $100 million in securities on a discretionary basis.

1. Registered Broker-Dealers:
   • Own and invest at least $10 million in securities of non-affiliated issuers.

1. Investment Companies:
   • Registered under the Investment Company Act of 1940.

1. Certain Banks and Insurance Companies:
   • Both banks and insurance companies generally had to meet a net worth threshold of       at least $10 million.s defined in Rule 144A.

1. Entities Wholly Owned by QIBs:
   • Acting for their own account or for the accounts of other QIBs. 

The issues we bring to market fall under Regulation D (RegD) , which provides exemptions for registration requirements imposed by the SEC. Due to the size of offerings we utilize Rule 506(b) and Rule 506(c), which have individual investor limits defined below. 

Regulation D Offerings and Investor Limitations

Introduction:

Regulation D, a section of the Securities Act of 1933, provides exemptions from the traditional registration requirements imposed by the Securities and Exchange Commission (SEC) for certain private securities offerings. These exemptions are designed to facilitate capital formation for companies while protecting investors through various regulatory mechanisms. One critical aspect of Regulation D is its limitation on the types of investors who can participate in these offerings.

Investor Types:

1. Accredited Investors: Regulation D offerings are primarily targeted towards accredited investors. Accredited investors are individuals or entities that meet specific criteria, such as having a high net worth or sufficient income. This category includes:
   
   • Individuals with an annual income of at least $200,000 (or $300,000 combined income with a spouse) for the last two years, with an expectation of maintaining a similar income level.
   • Individuals with a net worth exceeding $1 million, either alone or jointly with their spouse, excluding the value of their primary residence.
   • Certain institutional investors, such as banks, investment companies, and employee benefit plans.

1. Sophisticated Investors: In some cases, Regulation D offerings may be accessible to "sophisticated investors" who possess a certain level of financial knowledge and experience, even if they do not meet the accredited investor criteria. This allows for a broader pool of investors while still considering their ability to make informed investment decisions.

Reasons for Investor Limitations:

1. Risk Mitigation:The limitations on investor types are in place to mitigate the risks associated with private securities offerings. These offerings often involve startups and emerging companies that may carry a higher degree of risk compared to publicly traded securities. Restricting participation to accredited and sophisticated investors helps ensure that those participating have a better understanding of the risks involved.
2. Investor Protection:Protecting investors is a paramount concern for regulators like FINRA. By limiting participation to accredited and sophisticated investors, there is an assumption that these individuals or entities have the financial capacity and knowledge to assess the risks associated with private offerings. This safeguards less experienced or financially vulnerable investors from potentially high-risk investments.
3. Promoting Capital Formation:While Regulation D imposes restrictions on investor types, it also plays a crucial role in promoting capital formation for businesses, especially startups and small enterprises. By providing exemptions from certain registration requirements, it facilitates access to capital for companies that might not otherwise be able to raise funds through public markets.

Conclusion:

Regulation D offerings provide a vital avenue for companies to raise capital while balancing the need for investor protection. The limitations on investor types are a key component of this regulatory framework, ensuring that those who participate are well-equipped to evaluate the risks associated with private securities.

It's imperative for financial professionals and market participants to adhere to these regulations to maintain market integrity and protect the interests of both issuers and investors.

Please note that this language serves as a general guideline and should not be considered legal advice. Always consult with legal experts or compliance professionals for specific regulatory guidance related to private securities offerings and Regulation D.

It depends on the offering. See below for more information:  

Rule 506 Offering:

• Two Variations: Rule 506 offers two distinct variations: Rule 506(b) and Rule 506(c).
  
  • Rule 506(b): Allows companies to raise an unlimited amount of capital, but they are limited to a maximum of 35 non-accredited investors. Companies must provide non-accredited investors with extensive disclosure documents and information.
  • Rule 506(c): Permits general solicitation and advertising of the offering, but it is limited to accredited investors only. There is no limit on the number of accredited investors who can participate.
• No Maximum Offering Amount: There is no specific maximum offering amount for Rule 506 offerings, making it a popular choice for larger capital raises.
• Disclosure Requirements: Companies conducting Rule 506 offerings must provide detailed disclosure documents to non-accredited investors in Rule 506(b) offerings.
• State Securities Laws: Rule 506 offerings are typically exempt from state securities laws (Blue Sky Laws), although some states may have notice or filing requirements.